In order to ensure longevity for your business, it is necessary to pay close attention to pricing strategy.
Upon taking a quick view of competitors prices and assuming that you can win consumers' business by having the lowest prices is a common pricing strategy; however, this is not necessarily a strong position for small businesses to have.
Larger competitors with deep pockets have the ability to lower operating costs and thus lower prices.
Small businesses do not have this luxury.
They will go out of business if they try to compete with larger competitors.
In order to avoid the low price strategy, small businesses should look at the demand in the market.
In order to do this, small businesses should examine the following three factors: 1.
Competitive Analysis.
Look at your competitors' whole package, not just their pricing.
2.
Ceiling Price, the highest price that the market will accept and pay.
In order to determine the ceiling price, survey customers, potential customers, and experts.
3.
Price elasticity.
If your product has less elastic demand then your business can have a higher ceiling on prices.
On the other hand, low elastic demand depends on consumers' perception of quality and their seeking the lowest prices for the product in your industry.
It is better to avoid the low price strategy for small businesses.
Review your profit goals and business plan.
At times price war is unavoidable.
In order to attempt to get dragged into a price war with competitors, enhance the exclusivity of your product or service, add value to your product, drop high maintenance goods, and brand your product.
Leave price-cutting and price wars to big businesses who can afford it.
As a small business, pricing strategies can help you to escape price wars and cutting.